It has only been days since Shanghai’s free trade zone opened for business and already, foreign travel agencies cant’ wait to offer full-on services in the area.
The prize: China’s booming outbound tourist industry.
Foreign tour operators are getting help from friendly policies that allow them to establish wholly owned subsidiaries in the FTZ. No longer do they have to wait two years to operate outbound tours after getting a license as happens most everywhere else outside the zone.
China’s tourist sector consists of local tours, inbound tours and outbound tours. Until now, the government has prohibited foreign travel agencies from operating outbound tours in which they should enjoy an edge due to the scope of their international operations.
They have resources their domestic counterparts don’t have — connections with overseas hotels and highly differentiated products, for instance.
American Express, JTB, Kuoni have ongoing joint ventures with domestic travel agencies but have been largely shut out of the lucrative outbound tour business. The profit margin in this sector is the highest in the industry, Wei Changren, chief executive of Jinlu Consulting, tells Yicai.com.
Interestingly, only 78 of the 24,944 travel agencies in China are foreign, National Tourism Administration data shows. These companies are expected to speed up plans to open operations in the FTZ, or even move their place of registration there, Wei says.
More than 100 million Chinese are expected to travel abroad in the year to next June, according to the China Outbound Tourism Research Institute. Domestic players that dominate this market, such as China Travel Agency and China CYTS Tours Holding, could see more foreign competition in the months ahead.
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